Searching For Bottomed-Out Stocks

In this week’s screen, we’re going to focus on searching for bottomed-out stocks that have recently hit or are trading near their 52-week lows.

The last week or so has been pretty brutal (in fact this whole year has been setting records on the downside so far), but the markets won’t go down forever.

And in this week’s screen I’m particularly interested in those stocks that have recently hit a potential bottom. Not just any bottom though, but a recent 52-week low.

I’m looking for these kinds of stocks because there have been some great stocks that have bucked the falling market’s downtrend. And while many of these stocks will continue to do so, some will now fall or become out of favor as new Sectors and Industries take on leadership roles.

A perfect example is the healthcare sector. At one point that was an area of safety. But over the last week or so, there’s been a dramatic unwinding of these stocks.

As the market falls and ultimately puts in a new bottom, new stocks will begin to get noticed, and these should have some excellent upside potential.

Parameters

• Zacks Rank <= 3
  The Zacks Rank is one of the best Ranking systems out there, with the Zacks #1 Ranks showing an average annual return of over 26%, the Zacks #2 Ranks over 16% and the Zacks #3 Ranks over 7%. The Zacks #4 Ranks and Zacks #5 Ranks, which are Sells and Strong Sells, have significantly underperformed the market over the years, so we’re keeping those off of our list.
• % Change in F(1) Earnings Estimates over the last 12 weeks > 0
  Because we’re looking at Zacks #3 Ranks as well, we want to make sure that the analysts covering them are raising their estimates and getting more bullish on the stocks.
• Year over Year Projected EPS Growth > 0
  These companies have to have a growth story. Without any growth, it’s hard to make a case for a sustained rally. So a brighter future for these companies is a must.
• Current Price/52 Week Low <= 1.2
  Stocks trading at their 52-Week low will have a ratio value of 1. Stocks with a ratio value of 1.2 means it’s 20% above the low. This screen looks for companies less than 20% off the low. In other words, it can be on the low, just a bit off the low or even up to 20% above it. But we’re excluding companies more than 20% above the low as we want to make sure we’re not getting into stocks that might be overextended on the upside.
• Relative % Price Change over the last 4 weeks > 0
  I’m looking for stocks that have outperformed the S&P 500 over the last 4 weeks. Some might have been up. Some might have been down. But they all performed better (i.e., at the very least fell less) than the S&P 500 over the last 4 weeks.
• I’m also applying the above parameters to stocks over $5 with over 100,000 shares traded.

Results

Here are 5 companies from this week’s screen (3/3/09):

Blount International, Inc. (BLT)
Deutsche Telekom AG (DT)
DTS, Inc. (DTSI)
Dionex Corporation (DNEX)
McCormick & Company (MKC)

What’s interesting to see is that you’ll find that a lot of these stocks have put in double-bottoms, rounded bottoms, spike bottoms or even inverted head-and-shoulder bottoms. And for anybody who looks at charts, it’s a great way to put fundamentally-improving companies with bottoming chart formations onto your radar screen.

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